Division of Taxation outlines tax-related changes for FY2014

By Meg Sullivan PBN Staff Writer

Rhode Island lawmakers enacted various changes in the state tax code for the fiscal year 2014 and the R.I. Division of Taxation has outlined the alterations, which ranged from the reinstatement of historic tax credits to exempting art sales from a seven percent sales tax.

PROVIDENCE – Rhode Island lawmakers enacted various changes in the state tax code for the fiscal year 2014 and the R.I. Division of Taxation has outlined the alterations, which ranged from the reinstatement of historic tax credits to exempting art sales from a seven percent sales tax.

After being closed in 2008 the historic tax credit program will be re-launched, distributing the $34.5 million worth of credits that were unused as of May 2013. Some policy changes have been instated though much of the program remains the same.

According to the Division of Taxation, tax credits will be provided for up to 20 percent of rehabilitation expenditures and the maximum project credit for a building is $5 million. The Division said it plans to submit a report September 2018 indicating the number of projects approved, projects’ costs and the tax credits associated with the projects.

State tax policy on liquor also underwent several changes. Under the newest laws only class A liquor licensees (liquor stores and package stores) must file annual reports of total alcohol sales to the Division of Taxation as opposed to any licensee in Rhode Island authorized to sell alcohol whole sale or retail.

For a period extending between July 2013 and March 2015 the excise tax on select categories of alcohol will be increased. The rate per gallon for still wines is increasing from $0.60 to $1.40 and for malt beverages it is increasing from $3.00 to $3.30. For a 16 month period from December 2013 to March 2015 wines and spirits sold at package or wholesale stores will be exempt from the state sales tax.

Another major change is a sales tax exemption that will apply to artists, composers and writers selling “original and creative works” throughout Rhode Island. Instead of the former policy, under which the exemption only applied to artists in certain areas of select cities including Providence, Pawtucket and Newport, the entire state will be treated as an arts district.

The Tax Administrator in partnership with the R.I. Council on the Arts will compose an annual report describing the impact of the tax exemption on employment, sales, spending and other factors in the art district

Developments implemented to help enforce state tax law include new criminal and civil penalties for paid tax return preparers who intend to evade tax obligation as well as the institution of an investigation and enforcement group under the Division of Taxation named the Special Investigation Unit.

Rhode Island will now comply with federal law with respect to the Internal Revenue Code 179 deduction. Businesses can deduct the full price of approved software and equipment purchased during the tax year. The Rhode Island deduction was previously limited to purchases not exceeding $25,000.

Among other changes, corporations will no longer be able to utilize Rhode Island tax benefits for the federal domestic production activities deduction in the 2014 fiscal year, farmlands will now be assessed based on use value not fair market value, the amount of tax credits distributed in the Credit for Contributions to Scholarship Organizations program, a program that awards tax credits to businesses that donate to scholarship organizations, has increased from $1 million to $1.5 million and the hospital licensing fee rate has decreased to 5.246 from 5.35 percent.

Other legislation passed includes a law pledging that Rhode Island remote sellers will be required to pay, collect and remit Rhode Island sales and use tax if a federal law is passed allowing it, a law permitting the Tax Administration to hire collection agencies for assistance, a law increasing the rate of net terminal income payable to slot parlor Newport Grand LLC, an elimination of a fee employers previously had to pay to the department of Labor and Training and a change in the state’s job development assessment rate.

To view the Division of Taxation’s full report on the upcoming tax changes, visit: www.tax.ri.gov.

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